Unemployment: Budgeting

I know a lot of people can be intimidated by budgeting, and money matters in general. I used to be the same way, until I realized I was making too many mistakes and being caught off guard too often by overdraft fees and not being prepared for regular expenses. Finally, when I was in college I went to a budgeting workshop and it completely changed everything. I learned a lot and it’s really helped in taking responsibility and control of my finances, and in being prepared for surprises.

One of these surprises was being laid off. Sadly it happened right after a vacation that I had been saving for (and therefore had depleted all of my savings), but when it happened it only took me an hour or so to figure out what I absolutely had to pay to cover all my bills every month, where I was able to trim some of my spending, and what I needed to cut out of my spending habits completely to be able to live off of my new rate of income. Magically enough because of how much money I used to make and how long I worked for my previous company, I’m getting enough money to pay all of my bills. I suppose if I was living a little bit above my means back when I had a job, it would have been pretty obvious to me now, but it turns out my bills are roughly equivalent to my unemployment income. You’re also allowed to earn a little extra above what unemployment gives you (25% more, to be exact), so I’ve been attempting to get my full 125% of money I could be earning right now. Where I definitely tightened my belt a little bit (I had a few subscriptions and spending habits that were definitely frivolous) and talked to certain bill collectors who I knew would understand my situation (for example, you can defer student loan payments for 6 months at a time if you’re unemployed) and I haven’t been saving much, but financially, I’ve been quite comfortable and have had a little extra cash for spending.

Here are some things that I started using when budgeting to smooth the process along and make the whole thing a little less scary…nothing makes me sadder than people who don’t want to build a budget or look at their finances because they feel like they’re better simply not knowing or dread looking over their accounts. Now the only thing I “fear” when looking at my finances is how long it might take…time is literally the only hassle in my process at this point in time.

Things I learned about budgeting:

1. Set priorities

A lot of people I talk to seem to think that all bills are created equal. This is simply not the case. For me, priority number one is paying rent and making sure I have at least enough money to buy eggs for the week. Second comes utilities and internet. Third are things like Netflix and Xbox Live. Then there’s a bunch of less important things, like haircuts or books.

2. There is no “good” spending or “evil” spending

My bank account is now a morality-free zone. Any moral value that gets placed on what I spend my money on was ridiculous, and any guilt-tripping or gloating I did over it was a waste of time. Good or bad aside, you need to analyze if you should or shouldn’t be spending money. I can financially support a good cause, but if I don’t have have money to pay my electricity bill afterwards, I probably shouldn’t have done so. Just because I’m choosing to spend money that I have available on something that might seem self-serving, gluttonous, vain, or any other pursuit that sounds like it has shameful or “evil” connotations, it doesn’t matter—if all of my other priorities have been handled. I can allow myself to spend $30 on a blowout because I didn’t feel like washing my own hair this morning and want it to look pretty.

If you budget every cent you have, a few problems arise. First, you won’t feel like you really have any autonomy and might get a sense that you’re being overly-controlled (even when you’re simply controlling yourself). Secondly, you probably can’t stick to this budget, you will take money from somewhere else (where that money is probably important), and then you can’t meet your priorities. And then you feel like you’re a bad human being. This can spiral out of control. Rather, I just tell myself I have $20 or $50 or however much money with which I can do whatever I want. That way if my mom randomly asks me to go to the yarn shop with her, or I see a book I want online, or whatever, I can get it if I want without ruining the rest of my budget.

4. Try to over-estimate your expenses

It seems like some bills (like utilities) just end up costing more money than you expect. Plan for more than you think it might be, and if there’s some left over afterwards, you can spend that money elsewhere!

5. Be honest with yourself

Again, this goes back to morals in finances, but if you’re going to ignore patterns or not budget for something that you regularly do, your budget isn’t going to work very well. I know it sucks to look at your life sometimes, but if you spend $100 on cigarettes a month, then budget $100 for cigarettes. Don’t just say you don’t need to budget for it because “maybe you should quit” or budget an unrealistically low amount of money in an attempt to make yourself feel better.

6. Occasionally Micro-budget

Sometimes there comes a time where you need to split a budget into a smaller category…maybe you spend money pretty regularly at a particular shop (like the bagel place you go for breakfast most mornings) or want to split off some of your un-budgeted “for fun” money into a separate budget that goes towards books or art supplies monthly. This makes it easier to track and organize when these type of regular spending instances don’t get lumped into “Food” or “Un-budgeted”. Basically just watch for patterns and then start planning for them.

Other than that, the sooner you start budgeting, the better…it’s probably going to take at least two or three months of keeping close tabs on what’s going on before you can really analyze the data. Also, having less money to spend doesn’t mean I get to be less attentive to my finances either, it means I need to be more so. Even back when I was earning almost no money, a lot could go wrong if I didn’t keep an eye on things.

Here are some tools that I like for keeping track of things:

Phone Alerts/Overdraft Protection – My phone lets me know if my account dips too low. Usually this means something has gone wrong and lets me know I should go check out what’s happening while also keeping me from feeling like I should check my account every day/multiple times a day.

Spreadsheet – This is where my budget lives. I have columns for my projected expenses/income as well as a column for the actual numbers (which get entered when I actually receive the money/pay the bill). It helps me see what I haven’t paid or received yet as well. Mine’s pretty elaborate, and totals up a bunch of numbers, and color-codes them either green or red depending on if I spent less or more than I thought I would. Red in a particular category a few months in a row means I better up my budgeting expectations for future months. I do this for each paycheck…the only thing it doesn’t really help me with is to determine is when to pay things…if I get paid on the 4th and the 18th, which bills are due before the 18th and therefore need to come out of my money received on the 4th? I have a text document with a list of when my bills are due by (though there must be a better way, right?)

Mint – I’ve been using Mint for a few years now, and where it takes a little while to get it flowing properly, and then some time to fix it every now and then once it gets set incorrectly in a pattern (though usually this doesn’t happen), it’s really helpful overall. Basically it keeps track of as many accounts as you load into it and gives you some data from your spending patterns, tracks your overall net worth (or lack thereof) and whatnot. I think it’s probably really awesome for tracking credit card debt and the line, but I don’t have much of that…just my student loan bills, so I don’t get to make much use of that feature. It DOES give you a list of when it thinks bills are due (based on the dates you pay them) but sometimes those dates slip a little and it’s not 100% accurate. That said, I find it to be beyond worth it, especially when you get to see trends in your spending (whoa! Did I really spend 13% of my income over the last year on shopping? Maybe I should reign that in!)

Here’s another cool thing about it, as evidenced by this chart you can build. This is the last 6 months (the green) compared to the 6 months before that (the yellow). Looks like I’ve been saving money both for grocery shopping as well as eating at restaurants. Heck yes! That said, it looks like I’m spending a little more money going out to bars (but that’s probably because the majority of birthdays of people I know have been in the last few months and that’s where we’ve been celebrating).